Start-Ups, Investors Bet on Drone Economy

A drone on display in the exposition hall of the Border Security Expo in Phoenix

Entrepreneurs and investors are betting on a future full of flying robots that can be programmed to do anything from survey crops or wildlife to delivering vaccines to remote villages in Africa.

It may sound a little like something out of an episode of the "The Jetsons," but the reality is the Federal Aviation Administration is required to implement regulations to integrate commercial drones into the national airspace by 2015, meaning flying robots are going to become a lot more common in the U.S.

But entrepreneurs aren't waiting for the FAA deadline before building their start-ups. The moment is too ripe with opportunity to not jump in the commercial drone business now, those in the burgeoning space say.

"It's just one of those moments," said Chris Anderson, co-founder and CEO of 3D Robotics, which makes unmanned automated vehicles (UAVS). "It's the economy at scale. Those technologies that used to be incredibly expensive are now very cheap and getting better and faster than any other technology in history."

And while the technology for drones is getting cheaper, the estimates of how much the drone economy could be worth are very high.

In March, the Association for Unmanned Vehicle Systems International—the world's largest unmanned systems industry organization—forecast the total domestic economic impact of introducing drones into U.S. airspace by the FAA's 2015 deadline would reach more than $82.1 billion between 2015 and 2025.

With cash like that on the line, it's no wonder start-ups aren't waiting to get in the game.

According to the report, the two markets where drone technology could make the biggest economic impact are precision agriculture and public safety. These two markets alone make up about 90 percent of the known potential markets for unmanned aircraft systems.

"Drones are so important to the aerospace community because they are basically revitalizing the aerospace industry," said Mary Cummings, associate professor of aeronautics and astronautics at the Massachusetts Institute of Technology.

"I've been forecasting this for years," she said. "People are starting to dream up ways to use these because it's such a great technology and in terms of interesting, who doesn't love flight? And now you can put it in people's hands."

Anderson founded his company is 2009 while still working as editor of Wired Magazine. However, he said that after raising $5 million in funding from O'Reilly AlphaTech Ventures (OATV) and True Ventures in November he had to make a change.

"I decided that these things don't happen that often and I decided to go all in," he said.

Since he took over full-time at 3D Robotics, he has been working to make his company's open-source drones more appealing to the masses by making them more user friendly.

"It's like the Apple to Macintosh pivot. We're taking the complexity out of the machine," he said. "Right now, it makes perfect sense to a hobbyist or someone who has flown before, but for someone who hasn't, it's all too complicated."

Anderson said that he aims to make the new machines—which will launch in about three months—so simple that if someone had never used a drone before the user could easily figure it out the first time using it.

While Anderson focuses on building drones, there are a slew of other drone-focused start-ups that see big potential in developing the software and services for the coming drone economy, said Jeremy Conrad, founder of the hardware start-up incubator Lemnos Labs.

"We are certainly seeing an increase in these services [for] drone-based companies," Conrad said. "Some applications include videography, agriculture, security, so instead of having a guard dog, you may have a guide drone."

Airware, a company born out the Lemnos Labs program, is one of these start-ups that is not actually building the drones, but is making the hardware and software that third-parties can program so that the drone can perform different tasks.

The company's unique premise recently attracted some big money from some big names in the venture capital arena.

Andreessen Horowitz and Google Ventures announced in May they were investing $10.7 million in Airware.

VC firms, which have traditionally strayed from hardware investments, are taking a gamble on more hardware companies now, including drone start-ups, because the technology to make these devices and build the support for them has become cheap.

"The technology has gotten mature to the point that it's now pretty easy to make the Silicon start-up model work to get into the drone business," Anderson said. "Hardware is starting to act more like software."

DroneDeploy, which just recently came out of the start-up incubator Angelpad, is another businesses focused on providing a drone-focused service. The company, which is in the early stages of raising funding, makes the software that allows people to manage a fleet of drones.

Co-founder Mike Winn said he sees opportunity because certain business are going to need more than one drone in the sky, and they are going to need a way to manage them.

The company has already partnered with an organization to help manage a drone fleet that helps deliver medical supplies in West Africa, he said.